4 or fewer employees: enroll in April 2020, start participating May 15th, 2020

Most interaction with the plan will be through a website. Oregon Saves will mail an enrollment form to all employers of record in the state with instructions on either certifying they are exempt, or enrolling in the program.

New employers will be subject to the rules starting 90 days after being deemed an employer.

Once an employer is a participant in Oregon Saves, all new hires will be enrolled by default, with a savings rate of 5% of gross earnings. The rate will automatically increase each year thereafter by 1%, up to a maximum savings rate of 10%.

Employees can choose to change their savings rate, including stopping contributions.

The minimum wage in Washington State is $11.00 per hour in 2017. This minimum wage applies to all jobs, including agriculture. Employers must pay employees age 16 and older at least $11.00 per hour in 2017.

Employers are allowed to pay 85% of the minimum wage to employees under age 16. For 2017, this equates to $9.35 per hour.

Seattle, Tacoma, and the City of SeaTac currently have higher minimum wage rates. The local rate applies if it is higher than the state minimum wage rate.

To recap our previous post, wage discrepancies between employees may only be based on the following bona fide reasons:

A seniority system;

A merit system;

A system measuring earnings by quantity or quality of production (including piece rate);

Workplace location;

Travel (if necessary and regular for employees);

Education;

Training;

Experience; or

A combination of these factors, if they account for the entire pay discrepancy.

Discrepancies attributable to the factors above should be reasonable. For instance, paying an employee who has a master’s degree 10% more than her older colleague with a bachelor’s degree may be reasonable. Paying her 75% more and claiming the difference is due to the higher level of education would likely not hold up in court.

The law also prohibits employers from asking applicants how much they make in their current or former positions, and likewise prohibits employers from asking an applicant’s current or former employers about their wages. This is intended to prevent the continuation of pay discrepancies that could be traced back to an employee’s inclusion in a protected class. If employers come across this information without asking (e.g. the candidate volunteers it), they should ensure that it does not influence their offer.

An employee who brings a successful civil claim against an employer under this law will be entitled to a year of back pay, liquidated damages equal to that amount (thereby doubling the award), and reasonable attorneys’ fees.

No Intent or Bad Faith Required

It is crucial for employers to understand that discriminatory intent is not necessary to violate this law. An employee does not need to prove that she is paid less because she is a woman, or black, or a veteran; if the employer cannot explain the pay differential based solely on the allowable reasons listed above, the employee will win her case. This makes it essential that employers conduct an internal audit of their pay scales to uncover any differences in pay that they are unable to explain.

Negotiation, Desperation, or a Job Seekers’ Market Are Not Acceptable Reasons

Another important takeaway is that negotiation is not an acceptable basis for wage discrepancies, nor will it serve as a defense in litigation. Oregon’s EPA—while not prohibiting negotiation—will significantly limit the situations in which negotiation is appropriate. For instance, while offering a generous bonus schedule and fringe benefits to an applicant for a one-of-a-kind position may be acceptable, wages and benefits for positions of “comparable character” should remain the same, unless the discrepancies can be justified by the acceptable reasons listed above.

Additionally, over-the-top offers made because a position needs to be filled quickly, or because an applicant-friendly job market is emboldening job seekers to ask for higher pay, may prove problematic down the road. The law does not allow for employers to reduce employee pay to comply with the law, meaning that lower-paid employees may need to receive raises instead.

Action Items for Employers

Administer (or hire someone to conduct) an audit of your overall pay structure as well as an analysis of job groups and individual wages. The analysis should focus on whether differences in pay can be fully and reasonably explained by the bona fide factors above. Doing the audit sooner rather than later will allow you to plan for what may be significant changes in pay structure.

Edit any application forms, interview templates, or other documents that ask applicants or their employers about current wages or salary history. If you don’t want to change your practices now, put it on your calendar to revisit these documents in 2018.

Exercise caution with respect to offers or raises, starting now. Because the law does not allow for employee pay to be reduced for compliance, wages that are inordinately high due to factors not on the bona fide reason list (e.g. negotiation, desperation) could necessitate across-the-board increases.

Oregon Governor Kate Brown has signed H.B. 2005 into law, also known as the Oregon Equal Pay Act of 2017. This law aims to reduce persistent pay inequities, and also provides a safe harbor for employers that have voluntarily assessed their pay practices to identify and eliminate discriminatory actions.

Under the OEPA, employers may not “in any manner discriminate between employees on the basis of protected class in the payment of wages or other compensation for work of comparable character.” This includes paying “wages or other compensation to any employee at a rate higher than that at which the employer pays wages or other compensation to employees of a protected class for work of comparable character.” The following are key provisions:

Employers may not ask an applicant how much he/she is currently paid;

Employers may not base a new hire’s pay on that individual’s current or past compensation;

Employers may not comply with the Equal Pay Act by cutting a current employee’s pay.

However, employers may pay employees for work of comparable character at different compensation levels if the difference is due to a bona fide factor related to the position based on:

Seniority

A merit system

A system measuring earnings by quantity or quality of production (e.g. piece-rate work)

Workplace locations

Travel (if necessary and regular for employees)

Education

Training

Experience

Employers that violate the Equal Pay Act may be liable to employees for unpaid wages. Employees may seek redress by either filing a complaint with Oregon’s Bureau of Labor and Industries (“BOLI”), or by bringing a lawsuit against their employer directly. There is no exhaustion requirement mandating the filing of a complaint with BOLI prior to bringing a lawsuit.

Compensatory and punitive damages are also available upon a showing of an employer’s fraud, malice, or willful and wanton misconduct. However, an employer is entitled to file a motion to disallow an award of compensatory and punitive damages, which shall be granted if the employer demonstrates, by a preponderance of the evidence, that it: (1) completed, within three years before the date that the action was filed, an equal-pay analysis of the employer’s pay practices in good faith that was reasonable in detail and scope, and related to the protected class asserted by the plaintiff; and (2) eliminated the wage differentials for the plaintiff and has made reasonable and substantial progress toward eliminating wage differentials for the protected class asserted by the plaintiff. In light of this provision, employers should consider voluntarily conducting equal-pay analyses to identify and rectify instances of pay discrimination.

The bulk of the Equal Pay Act’s provisions become operative on January 1, 2019, giving employers time to address any existing pay disparities.

The Internal Revenue Service reminds employers that so-called “automatic gratuities” and any amount imposed on the customer by the employer are service charges, not tips.

Service charges are generally wages, and they are reported to the employee and the IRS in a manner similar to other wages. On the other hand, special rules apply to both employers and employees for reporting tips. Employers should make sure they know the difference and how they report each to the IRS.

What are tips?

Tips are discretionary (optional or extra) payments determined by a customer that employees receive from customers.

Tips include:

Cash tips received directly from customers.

Tips from customers who leave a tip through electronic settlement or payment. This includes a credit card, debit card, gift card, or any other electronic payment method.

The value of any noncash tips, such as tickets, or other items of value.

Tip amounts received from other employees paid out through tip pools or tip splitting, or other formal or informal tip sharing arrangements.

Four factors are used to determine whether a payment qualifies as a tip. Normally, all four must apply. To be a tip:

The payment must be made free from compulsion;

The customer must have the unrestricted right to determine the amount;

The payment should not be the subject of negotiations or dictated by employer policy; and

Generally, the customer has the right to determine who receives the payment.

If any one of these doesn’t apply, the payment is likely a service charge.

What are service charges?

Amounts an employer requires a customer to pay are service charges. This is true even if the employer or employee calls the payment a tip or gratuity.

Examples of service charges commonly added to a customer’s check include:

Large dining party automatic gratuity

Banquet event fee

Cruise trip package fee

Hotel room service charge

Bottle service charge (nightclubs, restaurants)

Generally, service charges are reported as non-tip wages paid to the employee. Some employers keep a portion of the service charges. Only the amounts distributed to employees are non-tip wages to those employees.

Reporting Tips and Directly and Indirectly Tipped Employees

Employees must report to their employer all cash tips received — except for the tips from any month that total less than $20:

Cash tips include tips received from customers, charged tips (for example, credit and debit card charges) distributed to the employee by his or her employer, and tips received from other employees under any tip-sharing arrangement.

Noncash tips (that is, tips received by an employee in any other medium than cash, such as passes, tickets, or other goods or commodities) from customers are not reported to the employer.

All cash tips and noncash tips should be included in an employee’s gross income and subject to federal income taxes.

Both directly and indirectly tipped employees must report tips to their employer.

A “directly tipped employee” is any employee who receives tips directly from customers, including one who, after receiving the tips, turns all of them over to a tip pool. Examples of directly tipped employees are waiters, waitresses, bartenders and hairstylists.

An “indirectly tipped employee” is a tipped employee who does not normally receive tips directly from customers. Examples of indirectly tipped employees are bussers, service bartenders, cooks and salon shampooers.

Employers are required to retain employee tip reports, withhold income taxes and the employee share of Social Security and Medicare taxes from the wages paid, and withhold income taxes and the employee share of Social Security and Medicare taxes on reported tips from wages (other than tips) or from other funds provided by the employee. In addition, employers are required to pay the employer share of Social Security and Medicare taxes based on the total wages paid to tipped employees as well as the reported tip income. Employers must report income tax and Social Security and Medicare taxes withheld from their employees’ wages, along with the employer share of Social Security and Medicare taxes, on Form 941, Employer’s Quarterly Federal Tax Return, and deposit these taxes in accordance with federal tax deposit requirements.

Tips reported to the employer by the employee must be included in Box 1 (Wages, tips, other compensation), Box 5 (Medicare wages and tips), and Box 7 (Social Security tips) of the employee’s Form W-2, Wage and Tax Statement. Enter the amount of any uncollected social security tax and Medicare tax in Box 12 of Form W-2. See the General Instructions for Forms W-2 and W-3.

For more information, including what to do if there are not enough wages to withhold all of the taxes, see Topic 761 – Tips – Withholding and Reporting.

Reporting Service Charges

Employers who distribute service charges to employees should treat them the same as regular wages for tax withholding and filing requirements, as provided in Publication 15, Employer’s Tax Guide.

Distributed service charges must be included in Box 1 (Wages, tips, other compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages and tips) of the employee’s Form W-2.

Few things are more frustrating for employers than finding out that a new hire oversold their knowledge, skills, and abilities. The employee looked great on paper and appeared confident and competent in the interview, but when it came to doing the basic duties of the job, they just didn’t have what it took.

To lessen the likelihood of this unfortunate situation, some employers want to see the candidate in action before formally hiring them. They’ll invite the candidate to spend a day or so at the workplace, shadowing a seasoned employee or doing some of the tasks of the job. This is known as a working interview. It’s legal to conduct working interviews, but there are serious drawbacks and risks to understand and consider. Consequently, we generally don’t recommend doing them. However, if you do conduct them, here are some issues to be aware of:

Compensation
First, working interviews must be compensated at a rate of at least the minimum wage. You’re basically hiring the candidate as an employee for that span of time. At the bare minimum, you would need to have the person complete a Form W-4 and Form I-9 to do the work. You cannot classify them as an independent contractor as they don’t meet the legal criteria for that classification. Legally, they are temporary employees – even though the time is fixed at one day or a couple of hours. Should you decide to go this route, we recommend that you have a check prepared for them to take with them at the end of the day. This way you don’t run afoul of any state laws pertaining to the delivery of final paychecks.

RisksThere are several risks to consider if you decide to do a working interview. One is that the candidate could be injured during that time and you would be liable for a workers’ compensation claim. If the employee wasn’t reported and paid correctly, your workers’ compensation carrier may not cover the claim. Additionally, candidates completing working interviews could file for unemployment if you do not hire them for additional work after the working interview. Unemployment tax is tied to the prospect’s wages during the preceding year, not to the employer. The shorter the period the person is employed by you, the less they will draw from your unemployment account.

Fortunately, there are alternatives to the working interview.

Alternative 1: Use a Temp Agency
If it is essential that you observe the candidate in your office under regular working conditions, you can contact a temporary agency and inquire if they would hire the candidate for a single day. The person would then be the employee of the temporary agency and no employee-employer relationship would be created between your company and the candidate. If you anticipate a lot of working interviews, this might be a good option to explore. You will, however, pay a premium for this service.

Alternative 2: Skills TestingAnother option is making a skills test part of the interview. The difference between working interviews and skills testing is the environment in which they are done. During a working interview, you ask the candidate to work alongside an employee or complete tasks that are a benefit for your organization. For instance, if you were to ask a candidate for an accounting position to work on your next payroll for four hours with the intention of using their work, you would have to pay them for their time. In contrast, skills testing involves setting up a scenario and asking the candidate to complete certain tasks on their own that will not result in a net gain to your organization. For example, you could provide a candidate with old payroll information, assign them a task with that information, and then assess their work for accuracy. This would be an acceptable unpaid skills test.

You can also ask an applicant to complete a skills test exercise at home. You will generally want to make sure that the amount of time it will take to complete the exercise will be reasonable – around an hour or so, not a full day. Typically, only finalists for the position should be asked to complete such exercises.

Whatever kind of testing you decide to do, there are some general guidelines you should keep in mind. The Uniform Guidelines on Employee Selection Procedures (UGESP) – jointly adopted in 1978 by the Equal Employment Opportunity Commission, the Civil Service Commission, the Department of Labor, and the Department of Justice – provides a framework for determining the proper use of tests and other selection procedures. The guidelines were designed to assist employers, among others, with federal requirements prohibiting employment practices that discriminate on the grounds of race, color, religion, sex, and national origin. The EEOC recommends the following best practices for testing and selection:

Ensure that employment tests and selection procedures are job-related and appropriate for your purposes. For example, a proofreading test might be appropriate for an editing position or an administrative assistant job, but it would not be a valid test for an automobile mechanic or an electrician. While a test vendor’s documentation supporting the validity of a test may be helpful if you find your company in litigation, you as the employer are ultimately responsible for ensuring that your tests are non-discriminatory, both in intention and effect.

Assess whether your selection procedures unintentionally screen out a protected group – for example people of a certain race or sex. If so, determine whether there is an equally effective alternative selection procedure that has less adverse impact and, if there is one, adopt the alternative procedure.

Keep your tests and procedures up-to-date relative to the specific positions. Job duties change over time, and as they change, so should your employment tests and selection procedures. There’s no sense testing for skills if a job no longer requires those skills. Tests and selection procedures should be predictive of success in the job.

Make sure whoever develops the tests, purchases them from a vendor, administers the tests, and assesses their results understands the effectiveness, appropriateness, and limitations of the test. Tests can a useful management tool, but managers who use them need to know what they’re doing.

If you want to avoid the hassle of pre-employment testing, another way to get an idea of an applicant’s skill level is to ask follow-up questions during the interview process and request that the applicant provide examples. So, if a candidate says in the interview that they have a particular skill, you could ask them to tell you about a time they used that skill or how they might handle various scenarios that require that skill. You could also pose questions that only someone with that skill would know how to answer.

In every U.S. state except Montana, employment is presumed to be at-will, meaning either the employer or the employee can legally terminate the employment relationship at any time, with or without notice, and with or without cause. The employer has not guaranteed employment for a period of time, and the employee has not promised to stay; therefore, either party can end the relationship without financial penalty. There are, however, exceptions and limitations to the at-will relationship, so employers should still be careful when terminating an employee.

A collective bargaining agreement or employment contract, for example, could change the relationship so that it’s no longer at-will. And it’s important to keep in mind that at-will employment does not permit an employer to terminate employment based on the employee exercising a legal right or belonging to a protected class (e.g., race, sex, religion, national origin); such a basis would be illegal and could lead to a discrimination claim.

Consequently, the safest way to terminate an employee is to have documentation that justifies the legitimate business reasons behind the termination. This documentation would include infractions of policy, instances of poor performance, and any disciplinary or corrective action taken. The more an employer can do to show that they gave a terminated employee the chance to improve, the better.

The bottom line is that while at-will employment makes it sound like you can terminate employees at any time, with or without notice, and with or without cause—and to a degree you can—legitimate and documented business reasons are always your best bet.

A semi-monthly pay method means that employees receive paychecks on two designated dates per month, meaning the number of days in each pay period varies. Use this guide to simplify this sometimes tricky calculation: Calculating Semi-Monthly Overtime

The U.S. Department of Labor announced the new salary threshold for certain employees to qualify as exempt from minimum wage and overtime under the Fair Labor Standards Act’s White Collar Exemptions.

Effective December 1, 2016, the new minimum salary level will be $47,476 per year ($913 per week). Up to 10% of this income may come in the form of non-discretionary bonuses, incentive pay, or commissions, as long as that portion of the compensation is paid at least quarterly. In the event that an employee does not earn enough in bonuses and commissions to meet the full minimum salary requirement, a catch-up payment can be made by the employer once a quarter.

The minimum salary requirement applies to all white collar workers who are classified as exempt executive or administrative employees, and to many who are classified as exempt professional employees. The duties tests for the White Collar Exemptions have not changed.

Under the new rules, this salary threshold will increase every three years. It will be set at the 40th percentile of weekly earnings among full-time salaried (not necessarily exempt) employees in the country’s lowest income region – currently the South. It is expected that the next change, which will be effective January 1, 2020, will increase the minimum salary to approximately $51,168.

The new rule also increases the minimum salary threshold for the Highly Compensated Employee (HCE) exemption from $100,000 per year to $134,004 per year. This exemption can be used when an employee carries out a limited number of executive, administrative, or professional duties, but is very well-compensated. The new rule sets the HCE threshold at the 90th percentile of all full-time salaried workers nationally. This number will also increase every three years, and is expected to rise to approximately $147,524 on January 1, 2020.

Some state laws create different minimum salary levels. When state laws differ from the FLSA, an employer must comply with the standard most beneficial to employees. Come December 1, the federal minimum salary level will be higher than any state-mandated minimum, and therefore must be followed.